Comments from the Kasner Symposium
This week will be a brief break from the regular
blog. All lawyers are required to
have a number of hours of continuing education annually. I recently attended the Jerry Kasner
Estate Planning Symposium at Santa Clara University, my alma mater. Several hundred attorneys, accountants,
investment advisors, insurance advisors and others, spent the better part of
two days, going over general notions of Estate Planning as well as updating
recent events and suggesting implications and ways to work new
developments. I am going to share
a few items for your education and consideration.
The first big item is a clear understanding of
Estate Tax and Gift Tax exemptions.
After there being no Federal Estate Tax in 2010, the Estate Tax
Exemption (ET) and the Gift Tax Exemption (GT) were again reunified in
2011. The maximum exemption
beginning in 2011 was $5,000,000 for ET and $5,000,000 for GT. These are now
indexed for inflation and as of 2013 the ET is $5,250,000 and the GT is
$5,250,000 and will rise a little every year, unless or until Congress seeks to
change this. This means, for
planning purposes you could transfer up to $10,500,000 before taxes come into
play. Now, I know most people are
saying, whoopee, this means nothing to me, I only wish I had more than
$10,000,000 to give to my family.
I get it. Me too. However, in California it is not
uncommon to have a simple house worth near $1,000,000. It is possible to have start up stock
that over night could be worth a lot.
It is possible to have a job, earning $150,000 or $200,000 per
year. Maybe your spouse has the
same earnings. And if you do,
depending on other needs or choices, the accumulation of real wealth over a
number of years is very possible.
Therefore, why not plan to maximize your savings, reduce the possible
government take, make things just a little better. Obviously, not everybody needs the full Estate Plan, with
all the bells and whistles, kicking open every loop hole. But, if you don’t plan for the best,
then the worst could just happen.
The next item of interest was considering this
exemption information relative to the type of trusts the Estate Planner puts
into place for the client. We have
not yet discussed Trusts in the blog, but they are coming up soon. But for those who have some knowledge
or understanding of trusts, there have been various formats in Estate Planning,
such as the standard A-B Trusts for a married couple, with a Bypass Trust, or a
Survivor Trust, or a Marital Deduction Trust (also called a QTIP). Depending on what you have, and how you
have used your exemptions, or plan to use your exemptions, we may be able to
simplify your trust structure, or add different trusts and allow shifting
assets.
Another major topic was that of Portability. I will likely dedicate an entire blog
or more to this concept after we discuss trusts. Portability is the ability for the surviving spouse to
absorb and use any unused ET. The
key to accessing as much of the deceased spouses $5,250,000 ET is the proper
allocation and application assets.
This can be used to balance values, appreciation, basis adjustment and taxes
in the future.
Insurance was another facet frequently
discussed. Life Insurance to the
benefit of individuals can be used to provide liquidity upon your passing, as a
replacement for your income stream, paying off debts, paying off the house,
paying taxes and in the business arena, even funding buy-sell agreements of
family businesses or professional partnerships. Also, Life Insurance policies can be a tool for creating tax
free wealth transfers. However,
this too must be done carefully, so that amounts are properly considered, so
that beneficiaries are properly identified, and that for tax purposes,
ownership rights are clearly delineated.
This leads to the discussion of the ILIT – the Irrevocable Life
Insurance Trust and its many permutations.
A final point to raise from the symposium was in the
segment discussing current events and legal changes in the court. The biggest impact item here were the
two equal rights cases, U.S. v. Windsor, striking down part of DOMA, the
Defense of Marriage Act and Hollingsworth v. Perry, the ruling against
California’s Proposition 8 which banned gay marriage. Both cases were discussed in my blog this summer. Each case approached equal rights in a
different fashion. What has
happened since then is that the IRS has issued a letter opinion, essentially a
legal interpretation that the IRS will enforce, stating that any gay or lesbian
couple, married in any of the 15 jurisdictions allowing for same sex marriage,
will be treated as a married couple, and even if they move to state other then
where they were legally married, they may file taxes as married persons, and
that the state tax authorities must honor that designation for tax
purposes. Ironically, in many
instances there can be some tax treatments that are not favorable to married
persons, so now same sex couples can also suffer the so called “marriage
penalty”. Gotta love
equality.
Next time we will get back on track to talk about
conditional devises, or gifts with strings attached. In the weeks to come, I am planning on getting some articles
contributed on tax issues and then we will start to discuss trusts. Please stay tuned.
In the meantime, I hope you will review your Estate
Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney
to start this process. Stay tuned
for future blogs. However, if you
have any questions, feel free to respond below, or if you are interested in
learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare
Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support,
Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please
contact me at please contact me at fbegun@gmail.com, or through my other
websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.
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